Sometimes we do not understand the basic difference between these two. that has been explained here. For lecture and better understanding : for English lecture - https://youtu.be/tmnrpGRHgTA For Bengali Lecture : https://youtu.be/ya03HVLcn4M

1. Which one should we follow?

2. Issue covered
• Accounting basis
• Accrual concept with examples
• Matching principle with example
• Understanding basic difference
between these two

3. Accounting basis
Normally business organizations use one of two
basic accounting basis. Either cash basis or
accrual basis. Some business houses use
hybrid system, which is a mixer of cash basis or
accrual basis.
But accrual basis is better than the other two
system.

4. Definition of Accrual concept
Business transactions are recorded
when they occur and not when the
related payments are received or
made. This concept is called
accrual basis of accounting.

5. Examples
Example-1
A company sells TVs to its customers on cash and
credit also. Cash and accrual methods will view the
sells events differently.
The revenue generated by the sale of the TV will
only be recognized by the cash method when the
money is received by the company. If the TV is sold
on credit, this revenue will not be recognized until
cash is received under cash basis.
But under accrual basis both the cash and credit
sales will be recognized as sales as the
transactions have been made.

6. Examples
Example-2
An airline sells its tickets days or even weeks before the flight is made.
Under cash basis, revenue is recognized as soon as tickets are sold.
But under accrual method, it does not record the revenue immediately because
the flight, the event on which the revenueis based, has not occurred yet. Revenue
will be recognized when flight would be made.
Example-3
Under accrual basis, a business records its utility bills as soon as it receivesthem
and not when they are paid, because the service has already been used. The
company ignores the date when the payment will be made. Separate entry will be
made at the time of payment.
But under cash basis, this will not be recorded as expense until bills are paid off.

7. Matching principle- Definition
The matching principle directs a company to
report an expense on its income statement in
the period in which the related revenues are
earned.

8. Example
let's assume that a company's sales are made entirely through sales
representatives (reps) who earn a 10% commission. The commissions are paid
on the 15th day of the month following the calendar month of the sales. For
instance, if the company has Tk. 600,000 of sales in December, the company
will pay commissions of Tk. 60,000 on January 15.
The matching principle requires that Tk. 60,000 of commissions expense be
reported on the December income statement along with the related
December sales of Tk. 600,000. If the company does not follow the matching
principle, it might report the Tk. 60,000 of commissions expense in January
rather than in December. That means profit of December will be overstated.
A retailer's or a manufacturer's cost of goods sold is another example of an
expense that is matched with sales to no the gross profit. Other expenses of
the accounting period need to be charged in the income statement to know
the net profit.

9. Conclusion
From the above discussion, we understand that when any
transaction occurred it has to be recorded immediately.
So it is a continues process and related with recording of
transactions.
Whereas, matching principle says that you have to match
the revenue and the related expenses for a particular
accounting period in the income statement to see the
performance i.e. profit/loss of the organization in that
period. So it is related with measurement of the
organization’s performance,

10. So……….
Accrual basis tells about the timing of recording of a
transaction
Whereas, matching principle guides how the performance of
and business organization is determined.